and this approval was reflected in the OLCM. Thus, the only issues raised for the Court's consideration are: whether the agreement was in writing; whether it was properly executed; and whether it had been properly recorded.
A. Section 1823(e)(1)'s Writing Requirement
The agreement involved here does not meet the "in writing" requirement of § 1823(e)(1). For an agreement in an asset to be valid against the FDIC, it must be in writing. 12 U.S.C. § 1823(e)(1). A party raising a claim against the FDIC may generally not rely on piecemeal, supporting documentation to a proposed loan or a series of documents to meet the writing requirement, either under § 1823(e)(1), Beighley v. FDIC, 868 F.2d 776, 782-83 (5th Cir. 1989), or the D'Oench doctrine, Sweeney v. RTC, 16 F.3d 1, 5 (1st Cir. 1994) ("An intention to provide further funds . . . [is] insufficient to establish an obligation on the part of [a bank] which would meet the requirements of D'Oench."); FSLIC v. Gemini Management, 921 F.2d 241, 245 (9th Cir. 1990) ("[The bank's intent to loan funds] falls short of establishing that [it] was obligated to fund [the loan]. We believe D'Oench and its progeny require a clear and explicit written obligation."). Documents purporting to support a loan contract do not meet the writing requirement where a bank examiner could not have ascertained the exact nature of the asset by looking at the "four corners" of these documents. Jackson, 981 F.2d at 735. Bank examiners are unlikely to be able to successfully make such a determination where the documents, even when viewed together, do not facially indicate the existence of a valid contract. Id. Furthermore, a court should not draw inferences or implications to create a written agreement against the FDIC, e.g., Zook Bros. Constr., 973 F.2d at 1451-52; FDIC v. Hamilton, 939 F.2d 1225, 1231 (5th Cir. 1991), and a borrower's good faith reliance on the unwritten agreement is irrelevant, Sweeney, 16 F.3d at 5.
Where there is no written agreement or agreements clearly evidencing an alleged loan contract, borrowers may not raise claims stemming from the underlying, alleged promise to make a future loan; such claims are barred by both § 1823(e)(1), Dahlstrom v. FDIC, No. 91-4006, 1992 U.S. App. LEXIS 11528, at *3-4 (10th Cir. May 15, 1992); Gemini Management, 921 F.2d at 245 (same); FSLIC v. Two Rivers Assocs., 880 F.2d 1267, 1275-76 (11th Cir. 1989) (same); FDIC v. Dixon, 791 F.2d 932 (6th Cir.) (same) (unpublished opinion), cert. denied, 479 U.S. 949 (1986), and the D'Oench doctrine, Timberland Design, Inc. v. First Serv. Bank for Sav., 932 F.2d 46, 50 (1st Cir. 1991); Bell & Murphy, 894 F.2d at 753 (same). More specifically, board committee minutes discussing a bank's potential loan do not meet the writing requirement. RTC v. Carr, 13 F.3d 425, 431 (1st Cir. 1993) ("the minutes of a bank's executive committee, which merely record the authorization of the Board to the bank's officers to extend a loan on certain conditions, do not constitute a contract between a bank and the borrower" under § 1823(e)).
Here, the FDIC argues that the only documents that Plaintiffs can refer to as arguably constituting a written agreement are the Porter letter and some internal documents of the Bank (e.g., the OLCM). The FDIC continues that these documents do not suffice to meet the writing requirement for they only reflect interim steps in the negotiation of the $ 1.3 million loan. These negotiations were never finalized and thus there was no formation of a loan contract. Plaintiffs contend that the series of letters and other documents relating to the loan along with the Porter letter are sufficient to meet the writing requirement. They continue that they purchased the Coachman Inn for renovation in reliance on the Bank's initial promise and later commitment to lend 1.3 million.
Plaintiffs' contention is unpersuasive because these letters and other documents are indicative of exactly the opposite proposition than that which Plaintiffs advance. That is, rather than prove that there was a final loan contract, they attest to the incompleteness of the parties' loan negotiations. The Porter letter, even if construed as a commitment letter, does not constitute a contract. See Murphy v. Empire of Am., 746 F.2d 931, 934 (2d Cir. 1984) (under New York law, a lender's commitment letter constitutes a contract only when signed by both parties and when the commitment letter evidences that both parties "concurred as to the essential terms of the future mortgage transaction"). Similarly, the OLCM does not compose a contract. See Carr, 13 F.3d at 428 ("[the borrower] reaches for straws when he attempts to carve out a contract from the corporation minutes"). Essentially, these documents represent contingent offers and counteroffers--each containing different terms--none of which were accepted; thus, no contract was ever formed. Regardless of Plaintiffs' reliance on the Bank's alleged obligation to lend the $ 1.3 million, whether viewed separately or aggregately, these documents do not satisfy the writing requirement under either § 1823(e)(1) or the D'Oench doctrine.
B. Section 1823(e)(2)'s Execution Requirement
Even if the writing requirement was met, there is no indication that the written agreement was duly executed along with a contemporaneous acquisition of the asset by the Bank, as required by § 1823(e)(2). Where a borrower has not signed the relevant document that purportedly constitutes a written agreement under § 1823(e), the agreement is not valid for it is not duly "executed." 12 U.S.C. § 1823(e)(2); Crossland Fed. Sav. Bank v. 111 East Realty Co., No. 93 Civ. 2925, 1994 U.S. Dist. LEXIS 753, at *15 (S.D.N.Y. Jan. 28, 1994) (party opposing FDIC must produce a signed, written agreement between the two parties to satisfy § 1823(e)(2)'s "executed" requirement). This result is the same regardless of whether the subject document is an unsigned commitment letter, Gemini Management, 921 F.2d at 245, board minutes, Carr, 13 F.3d at 428; RTC v. Ruggiero, 977 F.2d 309, 316 (7th Cir. 1992), or an internal bank memorandum, FDIC v. Virginia Crossings Partnership, 909 F.2d 306, 309 (8th Cir. 1990). Furthermore, even if there is a written, executed agreement, there must also be a contemporaneous transfer of an asset--such as a promissory note and any necessary security interests--memorializing a borrower's obligation to a bank. Swedbank v. FDIC, No. 93-1338, 1994 U.S. App. LEXIS 10688, at *13-14 (1st Cir. May 13, 1994).
Here, both parties agree that the Porter letter is arguably the closest document resembling a written agreement; the LAR and the OLCM qualify as secondary candidates. The Porter letter, even if construed as a commitment letter (Plaintiffs concede that this was not a formal commitment letter), was unsigned by Plaintiffs. The LAR and OLCM similarly were unsigned by Plaintiffs. Thus, there was no executed document reflecting the Bank's alleged obligation to lend. Furthermore, because there was no executed promissory note or security interests evidencing Plaintiffs' obligation to the Bank, there was no contemporaneous transfer of an asset. Under these facts, Plaintiffs have failed to meet § 1823(e)(2)'s "executed" requirement.
C. Section 1823(e)(4)'s Recording Requirement
Finally, without a written, executed agreement, Plaintiffs cannot meet the requirements imposed by § 1823(e)(4). Section 1823(e)(4) states that a claim against the FDIC is not valid unless the subject "agreement . . . has been, continuously, from the time of its execution, an official record of [the acquired bank.]" 12 U.S.C. § 1823(e)(4). Though the Porter letter, the LAR or the OLCM may be construed as general records of the Bank, subsection (e)(4) requires an executed, written agreement that qualifies under subsections (e)(1) and (2) to be continuously kept as an official record of the Bank. See Id. No such agreement exists here. Thus, Plaintiffs have failed to meet § 1823(e)(4)'s recording requirement.
V. INVALIDITY OF TORT CLAIMS UNDER SECTION 1823(e)
Plaintiffs allege several tort claims based on the following theories: negligent misrepresentation, fraud and breach of an implied covenant of good faith and fair dealing. Each of these claims stems from the events surrounding the underlying loan transactions and negotiations. The FDIC argues that all of Plaintiffs' tort claims are invalid against it pursuant to § 1823(e). Plaintiffs argue that even if § 1823(e) is applicable, that provision does not invalidate their tort claims.
Plaintiffs' tort claims, because they are all based on the underlying loan transactions, are barred by § 1823(e). Tort claims derived solely from an agreement relating to an asset that fails to meet the conditions of § 1823(e) are invalid against the FDIC. See, e.g., Langley, 484 U.S. at 93 (fraud); FDIC v. Bernstein, 944 F.2d 101, 108 (2d Cir. 1991) (fraudulent inducement); Timberland Design, 932 F.2d at 50 (negligent misrepresentation); Washington Properties Ltd. Partnership v. RTC, 796 F. Supp. 542, 546 (D.D.C. 1992) (breach of implied covenant of good faith and fair dealing). That is, § 1823(e) "bars affirmative claims, whether sounding in contract or tort, when they are premised on an unwritten agreement." Sweeney, 16 F.3d at 4. The D'Oench doctrine, however, does not bar tort claims that arise solely from facts independent of those surrounding the asset acquired by the FDIC. Vernon v. FDIC, 981 F.2d 1230, 1233-34 (11th Cir. 1993) (securities fraud); Astrup v. Midwest Fed. Sav. Bank, 886 F.2d 1057, 1059 (8th Cir. 1989) (breach of fiduciary duty).
Here, Plaintiffs essentially argue that tort claims against the FDIC are not absolutely barred by § 1823(e). Though that proposition is generally accurate, see, e.g., Vernon, 981 F.2d at 1233-34, appurtenant tort claims stemming from an invalid, unwritten agreement and against the FDIC--such as those alleged by Plaintiffs--are barred under both § 1823(e) and the D'Oench doctrine, see, e.g., Langley, 484 U.S. at 93.
Plaintiffs have failed to meet the strict requirements of § 1823(e) and the D'Oench doctrine as required for them to be able to maintain their contract claims against the FDIC. Thus, Plaintiffs' contract claims are invalid against the FDIC. Plaintiffs' tort claims are all based on the same set of operative facts--those enveloping the loan negotiations. Thus, these re-characterized claims are similarly invalid against the FDIC. There being no genuine issues of material fact and the FDIC being entitled to judgment as a matter of law, the FDIC's Rule 56 motion for summary judgment as to Plaintiffs' contract and tort claims is granted. Let the clerk enter judgment accordingly.
DATED: Bennington, VT
June 27, 1994
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